February 19, 2010

‘Toyota Way’ was lost on road to phenomenal worldwide growth

TOKYO — Toyota separated itself from all other carmakers by immersing its workers in “the Toyota Way,” a cult of quality and innovation that was painstakingly taught to new hires by experienced mentors.

World-beating quality spawned astounding global growth. The number of cars made at Toyota plants jumped more than 60 percent between 2000 and 2008, a golden era of earnings when annual increases in production sometimes outpaced the total output of Mazda or Chrysler.

But now, as the company recalls millions of flawed cars around the world, there is an expert consensus that growth itself derailed the Toyota Way, blurring its focus on quality, thinning its stable of expert mentors and undermining its capacity to respond to consumer complaints.

Secrecy and scapegoating have compounded Toyota’s troubles. The company relies on foreign car buyers for most of its profit and nearly all its growth, yet decision-making remains centralized in Japan, where top executives have been slow to reveal safety problems that have led to recalls.

“Consideration for customers was lacking in Toyota,” Seiji Maehara, Japan’s minister in charge of transport, said this week after the government learned that the carmaker had known for months about a problem of squishy brakes on its Prius hybrid.

Yet until the Japanese government pressured them to recall more than 400,000 Priuses and other hybrid models on Tuesday, Toyota executives had insisted that the braking issue was a matter of driver “perception.”

In the United States, where years-old problems with a sticking gas pedal led to a suspension in January of the production and sale of eight vehicle models, Toyota had also neglected customer complaints, blamed drivers and was not forthcoming with federal investigators.

Systemic failings

As Toyota weathers the worst public-relations disaster in its history, its top executives are beginning to acknowledge that the company has major systemic failings.

At a news conference in Tokyo this week, Toyota’s vice president for quality control, Shinichi Sasaki, detailed three major weaknesses that the company has diagnosed in its quality monitoring and customer relations since October. That’s when Toyota began its largest-ever round of recalls.

As described by Sasaki, the problems include:

— Lack of thoroughness in testing new cars and car parts under varying weather conditions, as demonstrated by the recently recalled gas-pedal mechanism that tended to stick more as humidity increased.

— Failures in gathering information from customer complaints, especially in the United States.

— Inability to analyze and act quickly on complaints that have been received.

Company President Akio Toyoda wrote this week in The Washington Post that the carmaker created by his grandfather “has not lived up to the high standards we set for ourselves.”

He also acknowledged that global sprawl and lack of quality control, especially in the United States, have weakened the company’s capacity to respond to complaints and share safety information. He noted that when sticking gas pedals were discovered and replaced in Europe, the company did not alert dealers in the United States.

“We failed to connect the dots,” he wrote.

Outgrowing its expertise

How did Toyota lose its way?

The core reason, according to a number of auto-industry experts, is that the carmaker outgrew its human expertise.

“Toyota cannot develop engineers as fast as they can proliferate new models,” said Jeffrey Liker, a professor of engineering at the University of Michigan and author of five recent books on the virtues of the Toyota Way. “Each engineer is doing more and has more opportunity for error.”

Before the avalanche of growth, Toyota took about 10 years to train first-class engineers, Liker said.

These engineers and senior managers had time to absorb company values that gave them an intuitive feel for weighing quality demands against cost concerns — and how to squeeze suppliers on cost without getting inferior parts, said Susan Helper, a professor of economics at Case Western University in Cleveland and an expert on global manufacturing.

“So much of what made the company work well was that each manager was personally trained by a mentor who himself had long experience with the company,” she said. “When the fast expansion came, Toyota was very short of senior managers who were ready to become mentors. My sense is that decisions were made more on numbers, without understanding fully whether those numbers were measuring the right thing.”

As Toyota’s new cars became less mechanical and more dependent on electronics and computers, management’s intuitive feel for quality was further diluted, along with its expert understanding of how suppliers made parts, Helper said.

A rapid proliferation of new car models also weakened Toyota’s engineering backbone, according to Michael J. Smitka, a professor of economics at Washington and Lee University and an expert on Japanese manufacturing.

“The expansion was out of control and the engineers were very clearly stressed, working endless overtime,” Smitka said.

He said harried engineers were often forced to borrow from existing models — to save money and because they had no time to customize all new parts.

Less testing

Toyota’s reach for worldwide domination — the company said in 2002 that it wanted 15 percent of the global auto market and intended to be the No. 1 carmaker — dovetailed with the rise of low-cost competition in South Korea and elsewhere.

To cut costs, Toyota “dramatically reduced” crash testing of new car models, according to Koji Endo, a longtime auto analyst and managing director of Advanced Research Japan, a corporate research firm in Tokyo.

“They do virtual testing using computer models, and it is expertly done,” Endo said. “But from time to time there are unexpected real-world problems that the computer models do not account for.”

One such real-world problem — with the brakes of more than 400,000 Priuses and other hybrid models that were recalled on Tuesday — occurs only when the driver of a slow-moving vehicle slowly applies the brakes while moving over a slippery or bumpy surface. The problem causes brief and sometimes frightening delays in perceived braking capacity.

Sasaki, the senior quality-control executive at Toyota, said testing of the Prius was “not able to identify” this problem. But he said he felt it when he stepped on the brake of a Prius last weekend during a test drive on an icy road in northern Japan.

Prius owners have been complaining for months about the brakes — to the company and to Japan’s Ministry of Transport.

An official from the ministry said that if Toyota had been paying closer attention to these complaints, it would have realized there was a safety problem.